Law: Income Tax Act, 1922

Section: 3

Section 5, read with section 145 of the Income-tax Act, 1961 - [Corresponding to section 4, read with section 13, of the Indian Income-tax Act, 1922] - Income - Accrual of - Assessment year 1950-51 - Assessee-company which had leased its properties and assets to another party for purpose of carrying on manufacture of sugar, received lease amounts on 21-2-1950 and on 4-4-1950, which pertained for periods ending on 31-3-1949 and 31-3-1950 respectively - Whether as profits and losses of company are determined at close of accounts of each financial year, or accounting period, lease amount payable to assessee would normally have accrued on date of closing of account and assessee would have become entitled to same as its income from that date, and auditing of accounts and passing of order for payment to assessee by Board of directors were merely incidental factors which did not affect income already accrued - Held, yes - Whether, however, as amount were received by assessee as income during relevant previous years and as accounts of assessee were not kept on mercantile basis and amounts in question were not shown in accounts at all, ITO was justified in assessing these incomes when they were actually received, on behalf of assessee under section 4, read with section 13 of 1922 Act - Held, yes FACTS The assessee-company had earlier executed a deed of lease in favour of certain individuals in respect of all its properties and assets, for a consideration amounting to 10 per cent of the net profits of the business to be carried on by the lessees. Later, the interest in the lease was acquired by 'S' Ltd. which purchased the entire assets and liabilities of the assessee-company. The assessee-company then went into voluntary liquidation on 18-1-1950 and a liquidator was appointed to take charge of its assets. In pursuance of the terms of the lease deed, the liquidator on behalf of the assessee-company in liquidation, received certain amounts on 21-2-1950 and on 4-4-1950. The assessee, before it went in liquidation, had been closing its accounts on June 30 every year, yet the amount were not mentioned in its books of accounts as having accrued or become payable to the…

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